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POLICY: Medicare Bill just gets past the house

And in a rare Saturday posting . . .

After some real hard core arm-twisting, (plus leaving the voting open for 3 hours), at 6am this morning the House passed the Medicare Bill 220-215. It looked like it was going down 218-216 for over 2 hours when finally the Republican leadership got 2 of their holdouts to cave (and then a couple more committed).  I suspect what they say about watching sausage and watching legislation being made applies here!

We should know about the Senate by Monday. My suspicion is that it has the straight up and down votes to win, so it’s a question of the filibuster being used.  Just as it was in the Energy Bill.

PHARMA: PhRMA members learn to play the game

So I can’t quite stay away from the Bill….

In a reminder of how hardball politics is played in the USA these days, there’s a report out today (hat tip to California Healthline) that shows that in the first 6 months of 2003 the healthcare industry spent over $139m on lobbying in the run-up to Medicare bill. $37.7m came from the pharma industry. This number probably includes standard costs associated with keeping Washington offices, etc. so it’s not all "new" money. But obviously much more has been spent in the last four months, and there’s no doubt that, as in its successful attempt to defeat certain House Democrats who were in favor of price controls in the run-up to the 2000 elections, targeted contributions and lobbying have had a definitive pay-off for the pharma industry in this Bill.

This is no secret in health care.  The AHA, for-profit hospital groups and the AMA have been doing this forever in order to influence the Medicare and Medicaid reimbursement schedules.  The drug companies have too, of course, but as they were previously opposed to drug coverage, their contributions weren’t quite so targeted.  Now that the industry has decided to buy the best bill it can, you can see the results in the text of the bill–especially the import ban from Canada.  The ongoing federalization of the health care system continues.  It’s starting to look more and more like the Defense department and the military industrial complex–you can expect the lobbying/business techniques in that industry to become more common in health care.

This post is not meant as criticism of PhRMA.  Their fiduciary interest is to their shareholders, and once they saw that politically drug coverage was unavoidable, that interest means to get as much money as possible out of the government. And the way to do that in the USA is by using money to buy influence. In the light of the even more pork-laden energy bill coming out the same week–and you know that there was equal lobbying weight on that one too–more disinterested observers may believe that campaign finance reform needs a little strengthening. But that’s in a parallel universe and we and PhRMA live in this one.

GENERAL HEALTHCARE: A run-down of interesting stuff

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I’ve been a bit mesmerized by Medicare drug coverage in the last week or two and I’ve let a lot of stuff build up in my "draft folder" — so I’m going to do brief comments on many of the most interesting things I’ve seen come up. These will be way less verbose than usual! So in no particular order:

1) TECHNOLOGY: ePrescribing was mandatory in the House version of the Medicare Bill (thanks to Newt Gingrich’s influence).  But it ends up being optional in the final version to make sure that the AMA has no reason not to be on board for its passage.

2) TECHNOLOGY: Boston Scientific is close to having its new drug coated stent Taxus approved. When that happens it’ll probably be in the lead for a couple of years over its rivals from J&J and Guidant in the $5bn stent market. Various studies suggesting that stent-based angioplasty may not be the best option for cardiac patients continue to be ignored in the real world.

3) HEALTH PLANS: California Blue Cross has gone back to the origins of IPA-based HMOs by creating a new HMO that selects providers based on their cost-effective behavior, and then passes the savings onto consumers by charging them lower premiums. Whether this can survive in the market place is uncertain, but Mark Weinberg, Len Schaffer’s number two, has been talking about creating low cost plans aimed at the uninsured for some time now.  It’ll be interesting to see if the costs are low enough to encourage the uninsured to sign up. Meanwhile Paul Ginsburg’s team at HSC report that health plan and payer attempts to segment providers by cost-effectiveness into "tiered" plans (i.e. where the patient is steered to the low cost providers in the network via co-pay incentives) have been very limited and unsuccessful thus far.

4) PHARMA: Consulting company Decision Resources has a report out suggesting that the Breast Cancer drug market will grow from around $2 billion now to over $6 Billion in 2012. Most of the growth will be due to increased use of hormone therapy. Coincidentally it looks like the proposed reduction in reimbursement for oncologists doing infusion in their own offices (and selling the drugs on to plans and Medicare) will be reversed if the Medicare bill passes.

5) HEALTH PLANS: Consumer-directed health (CDH) plans are growing in take-up but rather slowly. They appear to be attractive to the healthier population within employer groups and although there are claims that they are saving employers money, I’m not sure they are not just cream skimming money from the employer’s insurance pool into the employees MSAs! If my suspicions are right employers will be looking at their overall impact more carefully as CDH options grow from being gimmick of the month to a real option. Of course one employer reaction might be to force all employees into them, essentially forcing employees to pay more out of pocket to cover the "donut hole" gap between what’s put in the MSA and the total out-of-pocket for which the employee is responsible.

6) TECHNOLOGY: The steady fusion of devices, drugs and procedures is making life complicated for regulators and payers. Forbes has an interesting take on when the FDA approves a device, but Medicare (via CMS) doesn’t allocate separate reimbursement for using the device in a procedure that already has a defined DRG.  While CMS is reviewing how it deals with this situation, because of the overall FFS nature of Medicare, a new innovation that costs more up front may not be reimbursed even if it will save money over time.  As more devices get more complicated and sophisticated, CMS’ ability to keep up in this cost-effectiveness–regulation–reimbursement triangle will be stretched.

That lot should keep you busy for while.  I’ll be back to saying lots about a little, rather than vice-versa, next week.

PBMs: Caremark hiccup or It’s better to be lucky than good

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Well I told you last week that I’d had a small bet on the PBMs losing value this week as investors realized that the Medicare legislation wasn’t guaranteed to pass.  It happened for random reasons that I bought put options last week on AdvancePCS, which trades in lockstep with Caremark, which is acquiring it. (In case you don’t know, put options go up if the underlying stock goes down). Did it go down because of the delay in passing the Medicare bill? Heck no, so I was wondering what to do as the options expire tomorrow.  Then midday today the news comes out that Caremark is being sued by whistleblowers who:

    allege that Caremark resold returned drugs, failed to credit the state employees’ health plan for copayments on returned drugs and falsified and destroyed documents to make it appear as if the company had complied with contractual time limits for processing and delivering prescriptions.

Interestingly enough, the state of Florida which was the client and who supposedly was defrauded, did not join the suit. So it probably has no legs. 

Nonetheless the news was enough to push AdvancePCS stock down $2 and to make my options to be worth 3 times what I paid for them.  As the traders say, "it’s good to be good and it’s good to be lucky, but it’s better to be lucky than good!" Pity that it was only a small bet.

PHARMA: Update on COX-2 piece

In my recent post about Cox-2 inhibitors, I suggested that pharma companies had been successful in getting them widely adopted, and that conversely PBMs and payers had done a bad job in counter-detailing. One doctor emailed me suggesting that I had overlooked the importance of defensive medicine–the desire of the doctor to avoid a law-suit. I challenged him to show me a lawsuit for prescribing ibuprofen and here it is, and the suit came from only one dose of ibuprofen.

You may feel that this overly stresses legal pressures on doctors’ prescribing. However, while the patient lost the lawsuit, and it was a pretty extreme case, there is clear evidence that some other medications have been marketed this way.  Genentech marketed TPA for heart attack victims by stressing that if a marginally less effective but much cheaper drug (Streptokinase) was used instead, legal ramifications would follow from patients’ families if the patient died. A large clinical trial had shown that there was a slightly better chance of patient survival if TPA was used.  TPA use became the norm very quickly. This might explain some of the COX-2 "over"-prescribing.  Of course, DTC advertising and poor formulary enforcement helped too

POLICY: The Medicare bill latest, or What does the failure of Medicare+Choice mean?

It’s impossible in a brief post to capture the full essence of the current Medicare bill. (Although Jeanne Scott’s latest newsletter tries very hard)! In a few days we’ll know whether it has the votes to make it in the House, and whether it’ll survive a potential Kennedy-led filibuster in the Senate.  And of course this doesn’t happen in a vacuum–there’s the small matter of the $25bn barrel of pork known as the Energy Bill that also has to go through the vagaries of the Senate.  However, leading aside the lack of price controls or caps in the pharma section of the bill, it’s worth looking briefly at the two of the most contentious issues. 

Competition: The Republicans want to put Medicare into competition with private plans. This has though been tried before, and after a promising start, it began to die a death. A report from the Commonwealth Fund, suggests that there were many problems with the 1997 attempt to introduce private plans into Medicare, known as Medicare+Choice.  The two most important are that the private sector’s participation is not stable, and that the private plans don’t cost any less than traditional Medicare.  Due to plans pulling out, participation has gone down from 15% of enrollees to only 11%. Realistically it’s impossible to say what the environment will be for the competition slated to be introduced in 2010 in 6 cities.  But there’s no guarantee that it will kill off Medicare as we know it or even that it’ll work.

Cost Containment: Also  buried in the bill is an overall cost containment strategy.  The Bill provides $400 bn over 10 years in increased spending. Via a complex formula, if this limit is broken and if more than 45% of Medicare  funding comes out of the general fund (because Part A via the payroll tax and Part B via premiums are not bringing in enough revenue), then Congress has to either cut Medicare spending or increase taxes. (I hope I got that right, but you can be sure it’ll be changed by the time it happens). The only certainty is that estimates like this will be wrong–original estimates for Medicare spending back in 1965 were something like $4bn a year and very soon they were off by a factor of 10, I believe! However, I’ve seen estimates that the spending cap will hit in 2008-20016, so again this is putting off the real issue into some future never-never land.  But I did notice this report from Health Affairs which suggested that hospital spending will rise 75% by 2012.  I’m unsure as to whether that will get included in the overall spending that triggers the cut, but as hospital spending is what Medicare Part A is for, I assume so. In any event there’ll be a big issue with hospital spending somewhere out past 2010.

Of course the politicos who are voting on this bill will mostly be out of the picture by then, and the bill doesn’t take effect at all until 2006. Its most important political implication–the impact on the senior vote in Florida and Pennsylvania in 2004–will not actually have anything to do with what actually happens, but will hinge on what the perception of the bill’s effect will be. And of course the votes in the next few days will be based on guesstimates of what that perception will be whether the bill passes or not.

For much more go see Don Johnson’s almost minute by minute blogging at The Business Word

POLICY: Fuchs’ proposal re-emerges

I’ve been engaging in some comments over at DB’s Medrants on some articles by the Hoover Institution’s Thomas Sowell in which he has been essentially defending the status quo (albeit in what I think is an intellectually weak manner that ignores economic reality and lies about other countries’ systems). So it’s good to have an innovative solution to our health care crisis proposed by America’s greatest health economist–and it’s a bonus that he used to practice right around the corner from Sowell at Stanford’s economics department. In an article called The Universal Cure, Vic Fuchs and Harvard medical ethicist Ezekiel Emanuel propose a way to get to universal health insurance while maintaining the pluralism and innovation in the current system.

On a personal note, I had my first health economics class with Victor Fuchs (a bit like having Tiger Woods give you your first golf lesson) and I was actually at a presentation of the first version of this proposal, which he gave some ten years ago. He has been advocating common sense in health economics for ever, but had been loathe to develop a systemic solution–after all he saw his friend Alain Enthoven having to defend his managed competition theory for his whole career. Finally around the time of the Clinton plan, Fuchs did come up with a policy solution. The way he talked about it was that America held two values:

1) Everyone deserved a basic health insurance plan.
2) You should be free to buy what you want.

His solution was what he called the Ford Taurus plan.  He asked the crowd if anyone had bought a Ford Taurus recently. Someone had.  "How much was the basic model?" $15,000 was the answer. "How much did you pay?" $19,000. "What was the most you could have paid with all the extras, the new stereo and the biggest engine?" Perhaps $24,000. Fuch’s conclusion then? Have a dedicated (sales)-tax that gave everyone a voucher for the health insurance equivalent of a Ford Taurus, and let those who wanted more services pay up with after-tax dollars. (Here’s a brief interview he gave about it at the time)

That’s essentially the same as the plan proposed in this article. Employer-based insurance would end. Instead all under-65 year olds would get a voucher and then choose a health plan.  If you want more services you pay up out of pocket. In a nod to the political process, Fuchs & Emanuel argue for phasing out Medicare very slowly by keeping those who "age-in" with the voucher system. They would also force all plans to offer the same basic insurance package for the price of the voucher, and would have a national board certifying that no games were played over risk-selection.

As an (amateur) economist, I like the dedicated tax idea, because it puts a visible real cost on health care for everyone, and allows us to have a rational debate about how much that tax should be. I also like the concept of keeping innovation and dynamism in the system by keeping health plans and providers competing. It’s also worth mentioning that a private system with multiple actors would be very hard to defraud as opposed to having a straight single payer like Medicare.

Most importantly Fuchs and Ezekeil believe it might actually work politically, as with some touching faith they point out:

    Vouchers hold the promise of securing wide support. Democrats have long favored the notion of universality, while Republicans instinctively favor voucher plans and have longed for the demise of Medicare and Medicaid. Businesses want to stop providing health insurance, and Americans want guaranteed health coverage with choice.

Unfortunately I can’t share their confidence.  The same arguments that the Democrats are using about turning Medicare into welfare might be true under this system, as over time the value of the voucher might fall to the extent that only the very poor got the "basic" plan. Meanwhile the inside health-care business Republican lobby would dislike the notion of having so much of their income based on a tax that was visible and, in the end, controlled by the public–even though in other countries the electorate has often voted to increase the level of government spending on health care. And of course, the getting "to" vouchers "from" employment-based insurance would be a huge bun-fight.

But what Fuchs does present is a rational solution for overcoming the objections to universal health care, without extending Medicare to everyone. As such it deserves to become part of the debate–much more so than Sowell’s ramblings.  But such a solution will be bogged down in details if it’s proposed by a politician. So sadly, I think we’ll see this great idea sink without trace.

QUALITY: Rise reported in medication errors

There’s a new report from The US Pharmacopeia about medication errors in 2002. It’s not clear from the press release but this article in iHealthbeat points out that  there’s been a 31% increase in hospitals (to over 480) reporting and a whopping 82% increase in errors being reported since 2001.  The total errors reported was over 192,000. But of course just because they are now being reported (anonymously) doesn’t mean that they weren’t happening before!

Of course almost all of these errors are corrected quickly or prove of no lasting harm to patients, but 1.7% of them did or even required intervention to save patient lives.  Interestingly more than 10% of the errors came from mistakes in computer input!  This suggests that CPOE is not necessarily the cure-all suggested by its vendors, or at least requires some further safeguards!  For more information look at this powerpoint.

TECHNOLOGY: Physician email and IT use

This is one of those, "I’m glad they wrote it so I didn’t have to," posts. iHealthbeat has two articles updating physician use of email and physician IT use. You may have seen smatterings of some of the studies used there before in in this blog, but these are two excellent summary articles. Caroline Broder has an expanded summary about the state of play in her column about online consultations , and the ever-wonderful Jane Sarasohn Kahn puts some recent surveys of IT in the doctor’s office into perspective.  Both wonderful reads, so go read them.

Meanwhile, my long promised piece on PDA and physician EMR use is still in the production queue….

UPDATE: CHCF also has a new report out from First Consulting Group on how providers should select and introduce patient-physician email communication systems.